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Tesco Corporation Reports Q4 and Full Year 2013 Results

Trading Symbol:
"TESO" on NASDAQ

HOUSTON, Feb. 28, 2014 /CNW/ - Tesco Corporation ("TESCO" or the
"Company") today reported net income for the quarter ended December 31,
2013 was $5.5 million or $0.14 per diluted share. Adjusted net income
for the quarter ended December 31, 2013, was $8.7 million, or $0.22 per
diluted share. Adjusted net income for the fourth quarter excludes the
after-tax impact of foreign currency translation losses, of $2.3
million, or $0.06 per diluted share primarily from Latin American
currency devaluations, and certain severance charges of $0.9 million,
or $0.02 per diluted shares, but includes the after-tax impact of a
sequential quarterly swing in allowance for doubtful accounts in Latin
America and The Middle East of $1.3 million or $0.03, higher legal fees
for patent defense of $0.4 million, or $0.01 per diluted share and $0.6
million, or $0.02 per diluted share, due to drilling delays from severe
North-American weather and Iraqi disruptions. This compares to adjusted
net income of $11.7 million and $13.7 million, or $0.29 and $0.35 per
diluted share, for the third quarter of 2013 and the fourth quarter of
2012, respectively. Revenue was $136.9 million for the quarter ended
December 31, 2013, compared to revenue of $132.2 million for the third
quarter of 2013 and $137.6 million for the comparable period in 2012.

Reported net income was $36.3 million or $0.91 per diluted share for the
year ended December 31, 2013. Adjusted net income for the year ended
December 31, 2013, was $38.5 million, or $0.97 per diluted share,
compared to adjusted net income of $41.1 million or $1.05 per diluted
share for 2012. Adjusted net income for the years ended December 31,
2013 and 2012 excluded a $1.0 million and $8.7 million after tax gain
on the sale of our Casing Drilling business, respectively. Revenue was
$525.3 million for the year ended December 31, 2013, compared to $553.1
million for 2012.

Commentary

Julio Quintana, TESCO's Chief Executive Officer, commented, "Given year
over year 2013 declining drilling activity levels in North America, we
look forward to a more stable and improving market in 2014. With
strengthening activity in our international business units, our Tubular
Services business enjoyed the highest annual revenue in the Company's
history and exceeded 4,000 automated jobs in the year. Although our Top
Drive business has continued to be negatively impacted by the decreased
active rig count in North America, our Top Drive strategy to shift to
international markets, especially to Russia and Latin America, has
partially offset the decline we experienced in North America. Today,
our Top Drive backlog which stands at 39 units compares favorably to
our third quarter backlog of 26 units. Finally, we are particularly
proud of our improvement in our balance sheet where cash grew year on
year from $22 million to $97 million as a result of greater focus on
optimizing working capital; a key aspect of our Tesco 3.0 quality
initiative. With the increased focus on our base businesses and
continuous improvement in our operational efficiency, we are well
positioned to meet the challenges and opportunities for 2014 and
beyond."

Our management reports our financial statements in accordance with U.S.
GAAP but evaluates our performance based on non-GAAP measures, of which
a primary performance measure is Adjusted EBITDA. Adjusted EBITDA
consists of earnings (net income or loss) available to common
stockholders before interest expense, income tax expense, non-cash
stock compensation, non-cash impairments, depreciation and
amortization, gains or losses from merger and acquisition transactions
and other non-cash items. This measure may not be comparable to
similarly titled measures employed by other companies and is not a
measure of performance calculated in accordance with GAAP. Adjusted
EBITDA should not be considered in isolation or as substitutes for
operating income, net income or loss, cash flows provided by operating,
investing and financing activities, or other income or cash flow
statement data prepared in accordance with GAAP.

We believe Adjusted EBITDA is useful to an investor in evaluating our
operating performance because:

it is widely used by investors in our industry to measure a company's
operating performance without regard to items such as net interest
expense, depreciation and amortization, which can vary substantially
from company to company depending upon accounting methods and book
value of assets, financing methods, capital structure and the method by
which assets were acquired;

it helps investors more meaningfully evaluate and compare the results of
our operations from period to period by removing the impact of our
capital structure (primarily interest), merger and acquisition
transactions (primarily gains/losses on sale of a business), and asset
base (primarily depreciation and amortization) and actions that do not
affect liquidity (stock compensation expense and non-cash impairments)
from our operating results; and

it helps investors identify items that are within our operational
control. Depreciation and amortization charges, while a component of
operating income, are fixed at the time of the asset purchase in
accordance with the depreciable lives of the related asset and as such
are not a directly controllable period operating charge.

Our management uses Adjusted EBITDA:

as a measure of operating performance because it assists us in comparing
our performance on a consistent basis as it removes the impact of our
capital structure and asset base from our operating results;

as one method we use to evaluate potential acquisitions;

in presentations to our Board of Directors to enable them to have the
same consistent measurement basis of operating performance used by
management;

to assess compliance with financial ratios and covenants included in our
credit agreements; and

Adjusted net income is a non-GAAP measure comprised of net income
attributable to Tesco excluding the impact of certain identified items.
The Company believes that adjusted net income is useful to investors
because it is a consistent measure of the underlying results of the
Company's business. Furthermore, management uses adjusted net income as
a measure of the performance of the Company's operations.

Q4 2013 Financial and Operating Highlights

Top Drives Segment

Revenue from the Top Drive segment for Q4 2013 was $81.9 million, an
increase from revenue of $78.0 million in Q3 2013. Revenue for Q4 2012
was $86.7 million.

Top Drive sales for Q4 2013 included 26 units (24 new and 2 used),
compared to 26 units (21 new and 5 used) sold in Q3 2013 and 30 units
sold in Q4 2012 (28 new and 2 used).

Operating days for the Top Drive rental fleet were 5,899 for Q4 2013
compared to 6,671 in Q3 2013 and 5,843 for Q4 2012.

Revenue from after-market sales and service for Q4 2013 was $15.3
million, an increase of 3% from revenue of $14.8 million in Q3 2013.
Revenue was $15.4 million in Q4 2012.

Operating income before adjustments in the Top Drive segment for Q4 2013
was $15.8 million, compared to $19.4 million in Q3 2013 and $21.3
million in Q4 2012. Our Top Drive operating margins before adjustments
were 19% in Q4 2013, a decrease from 25% in Q3 2013 and Q4
2012. Pre-tax severance charges for Top Drive were $0.4 million. The
sequential quarterly swing for Q3 2013 to Q4 related to allowance for
doubtful accounts for Top Drive was $0.9 million.

At December 31, 2013, Top Drive backlog was 32 units, with a total
potential value of $44.2 million, compared to 26 units at September 30,
2013, with a potential value of $37.6 million. This compares to a
backlog of 28 units at December 31, 2012, with a potential value of
$42.2 million. Today, our backlog stands at 39 units. While a portion
of this backlog will be shipped in the first quarter of 2014, more will
be weighted to the second and third quarters of 2014.

Tubular Services Segment

Revenue from the Tubular Services segment for Q4 2013 was a record $55.0
million, an increase from revenue of $54.2 million in Q3 2013. Revenue
was $50.3 million in Q4 2012. Revenue increased from Q3 levels due to
increased demand internationally for our automated offerings, partially
offset by lower revenue in North America.

We performed 1,014 automated casing running jobs in Q4 2013 compared to
1,063 in Q3 2013 and 947 in Q4 2012.

Operating income before adjustments in the Tubular Services segment for
Q4 2013 was $8.6 million, compared to $9.6 million in Q3 2013 and $6.9
million in Q4 2012. Our Tubular Services operating margins were 16%
for Q4 2013, down from 18% in Q3 2013, and up from 14% in Q4 2012. The
decrease from Q3 2013 was primarily due to a $0.9 million impact of
drilling delays from North American weather and Iraqi disruptions. The
pre-tax impact of severance charges for Tubular Services were $0.2
million. The sequential quarterly swing for Q3 2013 to Q4 related to
allowance for doubtful accounts for Top Drive was $1.0 million.

Other Segments and Expenses

Research and engineering costs for Q4 2013 were $1.9 million, compared
to $2.1 million in Q3 2013 and $2.7 million in Q4 2012. We continue to
invest in the development, commercialization, and enhancements of our
proprietary technologies relating to our Top Drive and Tubular Services
segments.

Corporate costs for Q4 2013 were $10.4 million, compared to $9.1 million
for Q3 2013 and $8.0 million in Q4 2012. The increase from Q3 2013 was
primarily due to increased legal fees of $0.6 million and severance
expense of $0.7 million.

Foreign exchange losses for Q4 2013 were $2.3 million, compared to $0.5
million in Q3 2013 and $0.8 million in Q4 2012. The foreign exchange
losses increase is primarily driven by Latin American currency
devaluations during the final quarter of 2013. In January 2014, the
Argentina peso devalued from approximately 6.5 to 8.0 and could
potentially negatively impact Q1 2014 by $0.04 to $0.05 per diluted
share.

Our effective tax rate for Q4 2013 was 39% compared to 32% in Q3 2013
and 26% in Q4 2012. Our effective tax rate, which is income tax expense
as a percentage of pre-tax earnings, increased from Q3 due to the
fluctuating mix of pre-tax earnings in the various tax jurisdictions in
which we operate around the world. In addition, no tax benefits are
derived DJDJfrom foreign exchange losses which alone caused an 8%
increase in our tax rate for Q4 2013.

Total capital expenditures were $12.8 million in Q4 2013, compared to
$8.4 million in Q3 2013 and $13.6 million in Q4 2012.

Full Year 2013 Financial and Operating Highlights

Top Drives Segment

Revenue from the Top Drive segment for 2013 was $311.6 million, a
decrease of 13% from revenue of $357.8 million for 2012, primarily due
to a decrease in the number of new top drive units sold during 2013,
coupled with lower market demand for after-market sales and services
primarily due to a decrease in drilling activity in North America.

Top Drive sales for 2013 were 100 units (88 new and 12 used), compared
to 131 units (121 new and 10 used) sold in 2012.

Operating days for the Top Drive rental fleet were 24,561 for 2013
compared to 25,420 in 2012. The decrease from 2012 was due primarily
to a decrease in operating days in the North America and Asia-Pacific
regions, partially offset by an increase in Latin America.

Operating income before adjustments from the Top Drive segment for 2013
of $67.5 million was a decrease from operating income of $87.7 million
for 2012, due primarily to a decrease in top drive sales and revenue
from after-market sales and services.

Tubular Services Segment

Revenue from the Tubular Services segment for 2013 was a record $213.1
million, an increase of 17% from revenue of $182.4 million for 2012,
due primarily to increased customer demand in all of our international
business units. The Tubular Services automated revenue during 2013 and
2012 also included $16.1 million and $6.7 million, respectively, of
revenue from CDS equipment sales.

We performed a record total of 4,008 automated casing running jobs in
2013, compared to 3,525 in 2012; a new record and a 14% annual growth.

Operating income before adjustments from the Tubular Services segment
for 2013 of $37.0 million increased 71% from operating income of $21.7
million in 2012. The increase from prior period is due to improved
margins for automated and conventional offerings, in addition to
increased sales of CDS™ equipment.

Other Segments and Expenses

Research and engineering costs for 2013 were $8.6 million a decrease of
18% compared to 2012 of $10.5 million. The decrease from prior year
was primarily due to the presence of Casing Drilling research and
engineering in 2012 until the sale of this business on June 4, 2012.

Corporate costs for 2013 were $42.4 million, an increase of 40% from
Corporate costs of $30.3 million for 2012, primarily due to increased
long-term and short-term incentive compensation of $4.2 million,
increased legal fees of $2.9 million, and increased depreciation of
$0.5 million related to the implementation of our ERP system. In
addition, 2012 included a $3.1 million credit to penalties and other
income due to a favorable tax judgment in 2012.

Foreign exchange losses for 2013 were $4.8 million, compared to $3.1
million in 2012. The foreign exchange losses increase is primarily
driven by Latin American currency devaluations during 2013.

Our effective tax rate for 2013 was 30% compared to 33% for 2012. Our
effective tax rate, which is income tax expense as a percentage of
pre-tax earnings, increased from Q3 due to the fluctuating mix of
pre-tax earnings in the various tax jurisdictions in which we operate
around the world. In addition, no tax benefits are derived DJfrom
foreign exchange losses which alone caused a 3% increase in our tax
rate for 2013.

Financial Condition

At December 31, 2013, cash and cash equivalents were $97.3 million,
compared to $22.0 million at December 31, 2012. During 2013, we built
up our cash balance through our operating activities and improving our
working capital balances, especially inventory.

Total capital expenditures were $37.5 million in 2013, compared to $62.7
million in 2012. We project our total capital expenditures for 2014 to
be between $35 million and $45 million, based on current market
conditions.

Conference Call

The Company will conduct a conference call to discuss its results for
the fourth quarter 2013 on February 28, 2014 at 10:00 a.m. Central
Time. Individuals who wish to participate in the conference call
should dial US/Canada (877) 312-5422 or International (253) 237-1122
approximately five to ten minutes prior to the scheduled start time of
the call. The conference ID for this call is 55513287. The conference
call and all questions and answers will be recorded and made available
until December 4, 2013. To listen to the recording, call (855) 859-2056
or (404) 537-3406 and enter conference ID 55513287. The conference call
will be webcast live as well as for on-demand listening at the
Company's web site, www.tescocorp.com. Listeners may access the call through the "Conference Calls" link in
the Investor Relations section of the site.

TESCO Corporation is a global leader in the design, manufacture and
service of technology based solutions for the upstream energy industry.
The Company's strategy is to change the way people drill wells by
delivering safer and more efficient solutions that add real value by
reducing the costs of drilling for and producing oil and natural gas.
TESCO® is a registered trademark in the United States and Canada. Casing Drive
System™, CDS™, Multiple Control Line Running System™ and MCLRS™ are
trademarks in the United States and Canada.

Caution Regarding Forward-Looking Information; Risk Factors

This press release contains forward-looking statements within the
meaning of Canadian and United States securities laws, including the
United States Private Securities Litigation Reform Act of 1995. From
time to time, our public filings, press releases and other
communications (such as conference calls and presentations) will
contain forward-looking statements. Forward-looking information is
often, but not always identified by the use of words such as
"anticipate", "believe", "expect", "plan", "intend", "forecast",
"target", "project", "may", "will", "should", "could", "estimate",
"predict" or similar words suggesting future outcomes or language
suggesting an outlook. Forward-looking statements in this press release
include, but are not limited to, statements with respect to
expectations of our prospects, future revenue, earnings, activities and
technical results.

Forward-looking statements and information are based on current beliefs
as well as assumptions made by, and information currently available to,
us concerning anticipated financial performance, business prospects,
strategies and regulatory developments. Although management considers
these assumptions to be reasonable based on information currently
available to it, they may prove to be incorrect. The forward-looking
statements in this press release are made as of the date it was issued
and we do not undertake any obligation to update publicly or to revise
any of the included forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by
applicable law.

By their very nature, forward-looking statements involve inherent risks
and uncertainties, both general and specific, and risks that outcomes
implied by forward-looking statements will not be achieved. We caution
readers not to place undue reliance on these statements as a number of
important factors could cause the actual results to differ materially
from the beliefs, plans, objectives, expectations and anticipations,
estimates and intentions expressed in such forward-looking statements.

These risks and uncertainties include, but are not limited to, the
impact of changes in oil and natural gas prices and worldwide and
domestic economic conditions on drilling activity and demand for and
pricing of our products and services, other risks inherent in the
drilling services industry (e.g. operational risks, potential delays or
changes in customers' exploration or development projects or capital
expenditures, the uncertainty of estimates and projections relating to
levels of rental activities, uncertainty of estimates and projections
of costs and expenses, risks in conducting foreign operations, the
consolidation of our customers, and intense competition in our
industry), risks, including litigation, associated with our
intellectual property and with the performance of our technology. These
risks and uncertainties may cause our actual results, levels of
activity, performance or achievements to be materially different from
those expressed or implied by any forward-looking statements. When
relying on our forward-looking statements to make decisions, investors
and others should carefully consider the foregoing factors and other
uncertainties and potential events.

The risks included here are not exhaustive. Refer to "Part I, Item 1A -
Risk Factors" in our Annual Report on Form 10-K to be filed for the
year ended December 31, 2013 for further discussion regarding our
exposure to risks. Additionally, new risk factors emerge from time to
time and it is not possible for us to predict all such factors, nor to
assess the impact such factors might have on our business or the extent
to which any factor or combination of factors may cause actual results
to differ materially from those contained in any forward looking
statements. Given these risks and uncertainties, investors should not
place undue reliance on forward-looking statements as a prediction of
actual results.